IMF slashes Saudi Arabia growth forecast on lower oil output

The International Monetary Fund (IMF) cut its growth outlook for Saudi Arabia on lower oil production, underscoring the challenges facing the kingdom as it seeks to overhaul its economy. Gross domestic product will expand 0.4 per cent in 2017, the lender said in its World Economic Outlook report update on Monday, citing the impact of the recent deal by the Organisation of the Petroleum Exporting Countries (OPEC) to reduce output. It compares with the fund’s October prediction of 2 per cent, and a median estimate of 0.9 per cent in a Bloomberg survey. The forecast reflects cuts in government spending as well as the impact of lower oil production, Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department, told reporters on Monday. “There is a big adjustment in spending downwards,” he said. “There is an adjustment in taxes upwards, and as a result non-oil growth is not going to be as good as it was during periods of strong oil prices.” Saudi Arabia is seeking to build investor confidence in its long-term strategy to reduce dependence on crude and boost non-oil sectors of its economy, while trying to plug one of the Middle East’s biggest budget deficits. The kingdom is planning to borrow as much as $15 billion this year on international debt markets to help fund its spending plans, following last year’s $17.5 billion sovereign bond sale. (Ahmed Feteha/Bloomberg)